Financial literacy has become all the more important lately, due to the high cost of living and the global economic downturn. Certainly, the pandemic has impeded the way we look at our financial habits.
As most are currently living on a prayer and also a shoestring budget, financial literacy could help us manage our hard-earned money wisely to achieve financial stability. And with a little luck, we might find ourselves on our way to financial freedom too. That said, the road to financial freedom is anything but easy. The rewards, however, are well worth the time and effort.
But before you can make informed financial decisions, you need to first equip yourself with the proper financial understanding and knowledge.
Understanding how to budget
Starting off with the basics—budget allocation. Although it seems rudimentary, budgeting requires comprehensive understanding for one to discern how much they are earning and how much they should spend effectively. Budgeting is fundamental for one to achieve their financial goals for the time being and for the future.
With budgeting, you will learn to live within your means as you keep tabs on tracking where your money goes and how much you are spending. Moreover, you will also become more pragmatic when it comes to wants and needs, as it helps you to steer clear of getting into debt with the endless online shopping deals that could be far too tempting to resist today. Besides, budgeting undoubtedly helps to save costs, which goes a long way if you are planning for early retirement, getaway vacation or a down payment. Bottom line, understanding more about our spending habits will help us handle our money better.
It makes it easier to manage debt
As you learned how to budget properly, you will also be inclined to gain an understanding of how your income relates to your expenses, which is crucial to avoid accumulating debt in the future. Being financially literate helps you to recognise the importance of seeking out the lowest interest rates when comparing loan terms.
It is undeniable that financial literacy and debt management go hand-in-hand. Many are finding themselves to be indebted today, especially in the case of fresh graduates who have to repay their student loans and whatnot. Financial literacy will give you an idea on knowing how much you owe the bank on your student loan, how much your family has to pay for your education, and how much you can afford to borrow. Such issues will galvanise you to become more prudent as you know how you are going to account for and pay off your debt in the future.
Helps you to plan for the future
Understanding how the many options for savings can come to affect your goals will give you a better knowledge of planning for your future. Say, if you plan to retire someday, you must understand how much money you will need for it to be feasible. Being financially literate will help you to work your way around your savings based on how much you are earning and how much you should save in order to achieve long-term financial stability.
Whether it is planning for your twilight years or an immediate vacation, you must first be able to understand your finances in order to turn your goals into reality.
Helps you to combat against crisis
The ongoing pandemic has certainly revealed the importance of financial literacy among the lives of many. As our lifestyle and livelihood can be hanging in the balance, especially during these days, the need to be equipped with financial knowledge has become all the more important in case we find ourselves on the brink of unemployment or things beyond our control.
In fact, it is said that financial education plays an important role in developing financial resilience and improving our well-being, such as creating emergency funds for any unforeseen predicament without having to break the bank. We have known this all too well as evidenced by the fact that most have certainly re-evaluated their financial position by looking for alternatives to cope with the new normal.
Today, digitisation is at the forefront of financial literacy as it plays an important role during these times of crisis. From digital budget planners to investment robo-advisers and online courses, financial information and wealth management services can be found online easily. Again, understanding more on the subject allows you to make better decisions regarding personal finances and planning for today and beyond.
Helps you understand your money better
For better or worse, every aspect of our lives needs money to be nourished and fulfilled. As long as we are still living, money will always be a part of our everyday life and it is up to us to be more thoughtful and considerate regarding where our money ends up. Understanding more about the value of money will allow us to gain control and make better choices regardless of whether it is for entertainment or planning for retirement.
As investment and saving choices have become increasingly complex over time, we must be educated enough to be capable of choosing financial instruments that could impact our financial capabilities. Be it buying a house, financing an education, or saving up for retirement, we need to understand more about our own finances to be able to make better choices for all sorts of purchases.
All things considered, financial literacy is the key to making better financial decisions. With financial education, you might just be able to quickly achieve financial stability and reach your goals faster, without having to compromise your other plans.
If you are financially literate and are passionate about helping others achieve financial stability, we would love to have you join us. At KWO, you will get to apply that knowledge not just for your own financial planning but for helping others as well. If you are looking for a rewarding career with a work-life balance, join us today!